Kathmandu owner KMD Brands reveals $9.6m loss, cuts dividend

KMD Brands' group sales were down by almost 15 per cent in the six months to the end of January.

KMD Brands, the owner of Kathmandu and RipCurl brands, is focused on improving sales of its outdoor clothing this winter after booking a $9.6 million loss in the six months to the end of January.

“Weaker consumer sentiment, the warmest winter on record in Australia and an over-reliance on winter weight product led to a disappointing first half for Kathmandu,” KMD chief executive Michael Daly said with its half-year result.

The loss was a 169 per cent decline on the previous year’s $13.9m six monthly net profit (which was a 352 per cent increase on the year before).

The retailer cut its interim dividend payment to investors.

“Improving Kathmandu sales performance is our immediate priority as we approach the key winter trading period.

“We expect to see progress in the second half and into financial year 2025 as we launch new innovative products, quick to market programmes, elevated visual merchandising, increased personalisation through the recently released ‘Out There Rewards’ and an expanded third-party brand strategy.”

As previously warned by the retailer, the half-year period just ended saw a 14.5 per cent decline in its group sales to $468.6m.

Kathmandu sales were down the most by 21.5 per cent, while Oboz footwear sales fell 20 per cent and RipCurl sales fell 9.2 per cent.

The decline in sales did slow in February, down by 3.5 per cent across the group, possibly marking a wind change in the retail sector.

Gross margin improved slightly, by 10 basis points, to 58.8 per cent and expenses were reduced by 5.7 per cent.

Craigs Investment Partners’ Geoff Zame said that showed some resilience.

“But with sales going backwards ... Making headway is difficult and the shares are languishing around 50 cents.”

It had net debt of $96.2m, which was 01.3 times its earnings, and had reduced the value of its inventory by $5m - a trend that was expected to continue.

“We expect the wholesale customer inventory reduction cycle to end this financial year, giving us a more positive financial year 2025 outlook in the wholesale channel for both Rip Curl and Oboz,” Daly said.

“In the second half the group will be cycling less challenging sales performance last year, particularly Kathmandu in the fourth quarter.”

Daly remained optimistic on the group’s prospects.

“We believe that with our portfolio of iconic global outdoor brands and leadership in sustainability, we remain a unique investment proposition and well-placed for the future.”

But Jarden analysts Guy Hooper and Nick Yeo were less convinced.

“While we view the changes as net positive in a competitive market, targets appear optimistic to us at this stage and we require a prolonged period of execution before building confidence,” their note following the result said.

“However, on suppressed expectations, we continue to see value.”

They held their buy rating on KMD’s stock.

KMD’s share price was trading down by 1.9 per cent to 51 cents on Tuesday.

Madison Reidy is the host of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.